Indian Court Classifies XRP as Digital Property Amid WazirX Security Breach
In a pivotal decision, the Madras High Court has officially recognized XRP and other cryptocurrencies as digital property in India. Justice N. Anand Venkatesh delivered this landmark ruling, highlighting the unique nature of cryptocurrencies as identifiable and manageable assets, thanks to private keys.
Investor Victory: Court Dismisses WazirX's Singapore Defense
The case stemmed from a cyberattack on WazirX, managed by Zanmai Labs Pvt Ltd. In early 2022, an investor acquired 3,532.30 XRP coins for ₹1,98,516. By mid-2022, WazirX experienced a breach, resulting in a $230 million loss in Ethereum and ERC-20 tokens. Post-hack, user accounts, including the investor's, were frozen. WazirX's recent reopening of deposits has met with user backlash, as access to funds remains restricted.
The investor asserted her XRP holdings were distinct from the stolen Ethereum assets, claiming they were held in trust by the crypto exchange. She sought legal protection under the Arbitration and Conciliation Act, 1996, to safeguard her assets from being redistributed.
Zanmai Labs contested this, arguing that its parent company, Zettai Pte Ltd in Singapore, was under a Singaporean court directive mandating loss-sharing among users.
Court Endorses Cryptocurrency as Property, Affirms Indian Jurisdiction
According to the Financial Express, Justice Venkatesh dismissed Zanmai's defense, confirming that the XRP assets were unaffected by the hack, which solely involved Ethereum tokens. He further emphasized that XRP tokens held by the investor were intact. The judge referenced Section 2(47A) of the Income Tax Act, 1961, which classifies cryptocurrencies as virtual digital assets.
Justice Venkatesh clarified that crypto assets in India are no longer deemed speculative, but are digital properties with quantifiable ownership rights. This ruling is a significant advancement in India's judicial recognition of digital assets.
Regarding jurisdiction, Justice Venkatesh explained the case's alignment with the Madras High Court, given that the investor's transaction involved an Indian bank account. He affirmed Indian courts' authority to protect domestic assets, even if related arbitration occurs internationally.